<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________to ___________
Commission file number 0-16254
Steel of West Virginia, Inc.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 55-0684304
- -------------------------------- ----------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
17th Street and 2nd Avenue, Huntington, West Virginia 25703
-----------------------------------------------------------
(Address of principal executive offices, Zip Code)
(304) 696-8200
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock, as of June 30, 1997, is as follows:
5,991,276 shares of common stock, par value $.01 per share.
<PAGE>
STEEL OF WEST VIRGINIA, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
June 30, 1997 and December 31, 1996......................... 3
Condensed Consolidated Statements of Income for
the Three-Month and Six-Month Periods Ended
June 30, 1997 and June 30, 1996............................. 4
Condensed Consolidated Statements of Cash Flows
for the Three-Month and Six-Month Periods Ended
June 30, 1997 and June 30, 1996............................. 5
Notes to Condensed Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.... 11
Item 6. Exhibits and Reports on Form 8-K....................... 12
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED BALANCE SHEETS
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
1997 1996
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................................................. $ 0 $ 0
Receivables, net of allowances of $579
and $599.......................................................................... 11,513 6,579
Inventories.......................................................................... 21,494 17,307
Deferred income taxes................................................................ 3,121 3,121
Other current assets................................................................. 421 220
--------- -----------
TOTAL CURRENT ASSETS............................................ 36,549 27,227
Property, plant, and equipment........................................................... 39,951 33,298
Goodwill................................................................................. 18,111 18,452
Other assets............................................................................. 329 322
--------- ------------
TOTAL ASSETS.................................................... $ 94,940 $ 79,299
--------- ------------
--------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Overdraft............................................................................. $ 1,731 $ 1,097
Accounts payable...................................................................... 5,983 4,161
Accrued payroll and benefits payable.................................................. 4,517 3,599
Income taxes payable (refundable)..................................................... 648 (1,146)
Other current liabilities............................................................. 2,237 2,021
Current maturities of long-term debt.................................................. 891 2,434
--------- ------------
TOTAL CURRENT LIABILITIES........................................ 16,007 12,166
Long-term debt........................................................................ 19,774 10,975
Deferred income taxes................................................................. 6,332 6,332
Other long-term liabilities........................................................... 618 819
--------- ------------
TOTAL LIABILITIES................................................ 42,731 30,292
STOCKHOLDERS' EQUITY
Common stock, $.01 par value: 12,000,000
voting shares authorized, 7,096,576 and
7,091,360 issued, including treasury
stock.............................................................................. 71 71
Paid-in capital....................................................................... 26,627 26,627
Treasury stock--1,105,300 shares at cost.............................................. (11,483) (11,483)
Retained earnings..................................................................... 36,994 33,792
--------- ------------
TOTAL STOCKHOLDERS' EQUITY....................................... 52,209 49,007
--------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY......................................... $ 94,940 $ 79,299
--------- ------------
--------- ------------
</TABLE>
NOTE: The balance sheet at December 31, 1996, has been derived from the
audited financial statements at that date.
See notes to condensed consolidated financial statements.
3
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
Net sales............................................................. $ 27,923 $ 23,797 $ 52,351 $ 50,444
Cost of sales......................................................... 23,675 21,429 44,042 44,669
--------- --------- --------- ---------
GROSS PROFIT...................................................... 4,248 2,368 8,309 5,775
Selling and administrative expenses................................... 1,646 987 3,055 2,155
Interest Expense...................................................... 235 343 495 708
(Gain)/Loss on disposal of assets..................................... (230) 53 (453) 2,003
Other (income) expense................................................ (276) (156) (343) (254)
--------- -------- --------- ---------
INCOME BEFORE INCOME TAXES............................................ 2,873 1,141 5,555 1,163
Income Taxes.......................................................... (1,216) (523) (2,353) (532)
--------- --------- --------- ---------
NET INCOME........................................................ $ 1,657 $ 618 $ 3,202 $ 631
--------- --------- --------- ---------
--------- --------- --------- ---------
NET INCOME PER COMMON SHARE, based on 5,994,114 and 5,992,987 weighted
average shares of common stock outstanding during the three months
and six months ended June 30, 1997 and 5,986,923 and 6,060,658
weighted average shares of common stock outstanding during the three
months and six months ended June 30, 1996........................... $ .28 $ .10 $ .53 $ .10
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
4
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
CASH FROM OPERATIONS....................................................... $ 689 $ 3,939 $ 1,099 $ 6,448
INVESTMENT ACTIVITIES
Additions to property, plant,
and equipment....................................................... (5,579) (798) (8,989) (1,444)
FINANCING ACTIVITIES
Revolving credit loan.................................................. 4,991 (2,598) 9,226 1,228
Long-term debt repayments.............................................. (201) (1,471) (1,970) (2,942)
Purchase of treasury stock............................................. 0 0 0 (3,500)
--------- --------- --------- ---------
4,790 (4,069) 7,256 (5,214)
--------- --------- --------- ---------
INCREASE (DECREASE) IN CASH............................................ $ (100) $ (928) $ (634) $ (210)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
STEEL OF WEST VIRGINIA, INC. AND SUBSIDIARIES
June 30, 1997
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include the accounts of Steel of West Virginia, Inc. (the "Company") and its
wholly-owned subsidiaries SWVA, Inc. and Marshall Steel, Inc. Such condensed
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three-month and six-month periods ended June 30,
1997 are not necessarily indicative of the results that may be expected for
the year ended December 31, 1997. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1996.
The preparation of the condensed consolidated financial statements in
conformity with generally accepted accounting principles requires that
management make certain estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
Net income per common share is calculated based on 5,994,114 and 5,992,987
weighted average shares of common stock outstanding during the three-month
and six-month periods ended June 30, 1997 and 5,986,923 and 6,060,658
weighted average shares of common stock outstanding during the three-month
and six-month periods ended June 30, 1996. The effect of the Company's stock
option plans was anti-dilutive for all periods presented.
NOTE B--INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
--------- ------------
<S> <C> <C>
Raw materials................................................... $ 1,737 $ 1,638
Work-in-process................................................. 7,738 6,624
Finished goods.................................................. 12,435 9,103
Manufacturing supplies.......................................... 3,609 3,967
--------- ------------
25,519 21,332
Less LIFO reserve............................................... 4,025 4,025
--------- ------------
$ 21,494 $ 17,307
--------- ------------
--------- ------------
</TABLE>
Annually, at the end of each year, management determines inventory levels
based on the taking of a physical inventory. The amount of inventories at
June 30, 1997, has been determined based upon inventory levels indicated by
perpetual inventory accounting records. In addition, an actual valuation of
inventory under the LIFO method can be made only at the end of each year
based on the inventory levels and
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costs at that time. Accordingly, interim LIFO calculations must necessarily
be based on management's estimates of expected year-end inventory levels and
costs. Since these are subject to many forces beyond management's control,
interim results are subject to the final year-end LIFO inventory valuation.
NOTE C--CREDIT ARRANGEMENTS
A summary of indebtedness under the Company's credit arrangements consists of
the following (in thousands):
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
--------- ------------
<S> <C> <C>
Term loan I.................................. $ 0 $ 1,120
Term loan II................................. 0 427
1994 Capital expenditure line................ 3,850 4,280
1997 Capital expenditure line 6,000 0
Revolver..................................... 10,531 7,305
Other notes payable.......................... 284 277
--------- -----------
20,665 13,409
Less current maturities...................... (891) (2,434)
--------- -----------
$ 19,774 $ 10,975
--------- -----------
--------- -----------
</TABLE>
The Company maintains a senior financing agreement that, as last amended
April 1997, provides for up to $15,000,000 of revolving credit borrowings,
capital expenditure line term loans, and other term loans. The interest rates
on its existing credit lines and term loans vary based on the Chemical Bank
prime rate or LIBOR plus 1-3/4%; and the annual revolving credit line
commitment fee is 1/8% of the unused balance. Under the terms of its senior
financing agreement, the Company is permitted to convert its Capital
Expenditure Line indebtedness to a fixed interest rate. The senior credit
agreement may be terminated by the Company or, on or after January 1, 2001
and upon 90 days written notice, by the lender.
Effective April 1997, the Company's senior lending agreement was amended to
provide, under the terms of an "Additional Capital Expenditure Line," up to
$23,000,000 additional borrowing availability to finance current machinery
and equipment expenditures, governed by a percentage of such expenditures.
Under the terms of the amendment the total borrowings under this new
borrowing line may, at the Company's election, through January 1, 1999, bear
a fixed interest rate, and certain prepayments of the credit through January
1, 1999, could result in prepayment fees of 1.5% of the amounts prepaid. As
of June 30, 1997, the Company has borrowed $6,000,000 under this "Additional
Capital Expenditure Line."
The final principal installments totaling $1,547,050 under the Term Loan I
and II portions of the senior financing agreement were repaid in full during
the quarter ended March 31, 1997. As of June 30, 1997, the revolving credit
line loan balance, due January 1, 2001, was $10,531,000, and the unused
borrowing availability approximated $4,469,000. The 1994 Capital Expenditure
Line portion of the loan agreement is required to be repaid in quarterly
principal installments of $215,000, with a final principal payment of
$195,000 on October 1, 2001. The 1997 Capital Expenditure Line will be repaid
in equal quarterly installments of principal computed on a ten year
amortization schedule, which installments shall commence on July 1, 1998 and
quarterly thereafter until paid in full.
7
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The Company's senior lending agreement contains various restrictive
covenants, including that the Company must maintain specified levels of
working capital and net worth (as defined in the agreement). In addition,
capital expenditures and dividends are limited to the annual amounts set
forth in the agreement. At June 30, 1997, the Company's retained earnings
available for dividends is $-0-. As a result of the lending agreement,
substantially all of the Company's property, plant, and equipment, inventory
and accounts receivable are subject to a third party's security interests.
NOTE D--COMMITMENTS AND CONTINGENCIES
The Company is principally self-insured for employees' medical care costs and
workers' compensation claims up to certain specified dollar limits. Under the
medical care program, the Company is insured by a private carrier for
individual claims in excess of specified dollar limits. The Company also has
excess coverage provided by the West Virginia Workers' Compensation Fund (a
state agency) for certain work related injuries. In connection with the
self-insured workers' compensation program, the Company has obtained an
irrevocable standby letter of credit in the amount of $1,000,000 (through
July 1998). A liability has been established for those illnesses and injuries
occurring on or before June 30, 1997, for which an amount of expected loss
could be reasonably estimated.
NOTE E--STOCKHOLDERS' EQUITY
Commencing in April 1995 through the quarter ended March 31, 1996, the
Company repurchased 1,105,000 shares at a total cost of $11,483,000,
including 350,000 shares purchased at a cost of $3,500,000 during the quarter
ended March 31, 1996.
NOTE F--FIXED ASSET IMPAIRMENT
During the first quarter of 1996, the Company determined that certain
cut-to-length equipment utilized in one of the Company's production lines was
not performing up to expectations and the decision to replace the equipment
was made. Based upon this indication of impairment, the Company recorded a
$1,862,000 charge against operations that has been included in the gain/loss
on disposal of assets.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET SALES
Net sales increased 17.3% in the second quarter of 1997 to $27,923,000 up
$4,126,000 from the second quarter of 1996, primarily due to an increase in
tonnage of products shipped. Finished tonnage sales increased to 45,070 tons
in the second quarter of 1997 from 35,421 tons for the second quarter of
1996. Billet sales increased to 1,370 tons for the second quarter of 1997
from 1,189 tons in the second quarter of 1996.
Net sales for the six months ended June 30, 1997 increased 3.8% to
$52,351,000 from $50,444,000 for the comparable period in 1996, primarily due
to an increase in tonnage of products shipped. Finished tonnage sales
increased to 82,526 tons for the six months ended June 30, 1997 from 75,808
tons for the comparable period in 1996. Billet sales increased to 3,380 tons
for the same period in 1997, from 2,334 tons for the comparable period in
1996.
COST OF SALES
Cost of sales decreased to 84.8% of net sales or $23,675,000 for the second
quarter of 1997 from 90.0% of net sales or $21,429,000 for the second quarter
of 1996. The percent decrease in cost of goods sold is principally due to an
increase in productivity and a decrease in workers compensation expense
coupled with fixed costs being a smaller component of cost of goods sold due
to higher sales and production levels.
Cost of sales for the six months ended June 30, 1997 decreased to 84.1% of
net sales or $44,042,000 from 88.6% of net sales or $44,669,000 for the
comparable period in 1996. This decrease in costs of goods sold was
principally due to an increase in productivity and lower costs for utilities,
medical care, and workers compensation, in addition to fixed costs being a
smaller component of costs of goods sold due to higher sales and production
levels.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Selling, general, and administrative expenses for the second quarter of 1997
were $1,646,000 as compared to $987,000 for the second quarter of 1996. This
increase was due primarily to (i) higher legal and professional fees incurred
in connection with the unsolicited proposal from CPT Holdings, Inc. to enter
into discussions regarding the possible sale of the Company, and the proxy
contest relating to certain of the matters that were voted on by the
stockholders at the Annual Meeting of the Stockholders, and (ii) higher
travel expenses. As a percentage of net sales, selling and administrative
expense was 5.9% in the second quarter of 1997 and 4.1% for the comparable
period in 1996.
Selling, general, and administrative expenses for the six month period ended
June 30, 1997 were $3,055,000, compared to $2,155,000 for the comparable
period in 1996. This increase was due primarily to higher legal and
professional fees, for the reasons set forth above, and higher travel
expenses. As a percentage of net sales, selling and administrative expense
was 5.8% in the six month period ended June 30, 1997, compared to 4.3% for
the comparable period in 1996.
9
<PAGE>
INTEREST EXPENSE, GAIN/LOSS ON DISPOSAL OF ASSETS AND OTHER OPERATING
EXPENSE/INCOME
Interest expense for the second quarter of 1997 was $235,000, compared to
$343,000 for the second quarter of 1996. Interest expense decreased primarily
due to $145,000 of capitalized interest incurred in connection with Phase II
of the Company's expansion and modernization program. As a percentage of net
sales, interest expense was .8% in the second quarter of 1997, compared to
1.4% for the second quarter of 1996. The Company recognized a gain on the
sale of certain equipment during the second quarter of 1997 in the amount of
$230,000 as compared to a $53,000 loss in the second quarter of 1996. Other
operating expense/income for the second quarter of 1997 was $276,000 of
income compared to $156,000 of income for the second quarter of 1996.
Interest expense for the six months ended June 30, 1997 was $495,000,
compared to $708,000 for the comparable period in 1996. Interest expense
decreased primarily due to $179,000 of capitalized interest incurred in
connection with Phase II of the Company's expansion and modernization
program. As a percentage of net sales, interest expense was .9% in the six
month period ended June 30, 1997, compared to 1.4% for the comparable period
in 1996. The Company recognized a gain on the sale of certain equipment of
$453,000 for the six months ended June 30, 1997 compared to a loss on the
disposal of equipment of $2,003,000 for the six months ended June 30, 1996.
Other operating expense/income for the six months ended June 30, 1997 was
$343,000 of income compared to $254,000 of income for the comparable period
in 1996.
NET INCOME
Net income for the second quarter of 1997 increased by $1,039,000 to
$1,657,000 from $618,000 for the second quarter of 1996. This increase in net
income is due primarily to higher sales and operating income. As a percentage
of net sales, net income was 5.9% for the second quarter of 1997, compared to
2.6% for the second quarter of 1996.
Net income for the six months ended June 30, 1997 was $3,202,000, compared to
$631,000 for the comparable period in 1996. This increase reflected both an
increase in gross profit and the absence, in this year's results, of the loss
on disposal of assets. As a percentage of net sales, net income was 6.1% in
the six month period ended June 30, 1997, compared to 1.3% for the comparable
period in 1996.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's primary ongoing cash needs are for working capital
requirements, debt service and capital expenditures. The three present
sources for the Company's liquidity needs are internally generated funds, a
capital expenditure term loan line, and the Company's revolving credit
facility, which the Company anticipates will be sufficient for its ongoing
cash needs. Working capital at the end of the second quarter of 1997 was
$20,542,000, compared to $15,061,000 at the end of the prior fiscal year.
This increase in working capital was funded primarily by the Company's
revolving credit facility. The Company's expenditures for required capital
replacements are currently anticipated to average approximately $1,000,000
annually over the next several years.
In December 1996, the Company's Board of Directors approved Phase II of the
Company's expansion and modernization program to the Huntington, West
Virginia plant. The program includes a new high speed reheat furnace,
quick-change mill roll stands, new warehouse space, and other miscellaneous
equipment enhancements. The
10
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project is expected to cost approximately $30.5 million (not including
capitalized interest) and is scheduled to be completed by late 1997 without
material disruptions to existing operations. The Company has funded, and will
continue to fund, the project from a combination of internally generated cash
flow and bank debt. In addition, from time to time, the Company evaluates
discretionary capital expenditures and acquisition opportunities. Any such
expenditure would be subject to availability of funds and approval by the
Company's Board of Directors.
FORWARD LOOKING STATEMENTS
Any Forward Looking Statements contained herein are subject to the section on
Forward Looking Statements contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1996, including the following risk
factors set forth therein: the cyclical and capital intensive nature of the
industry; pressure resulting from foreign and domestic competition; reduction
in demand for the Company's products and industry pricing; volatility of raw
material costs, especially steel scrap, resulting in reduced profit margins;
excess industry capacity resulting in reduced profit margins; and the cost of
compliance with environmental regulations. In addition, the Forward Looking
Statements contained herein are also subject to the timely completion of the
modernization and expansion program and the Company's ability to effectively
integrate new equipment.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders held on May 15, 1997, for which proxies
for the meeting were solicited pursuant to Regulation 14A of the Securities
Exchange Act of 1934, the stockholders elected six directors, each for a term
of one year. The tabulation of the votes cast for each nominee for director
was as follows:
<TABLE>
<CAPTION>
Name of Nominee VOTED FOR
- --------------- ----------
<S> <C>
Stephen A. Albert........................ 4,752,127
Robert L. Bunting, Jr.................... 4,752,127
Timothy R. Duke.......................... 4,752,084
Albert W. Eastburn....................... 4,752,127
Daniel N. Pickens........................ 4,752,127
Paul E. Thompson......................... 4,752,177
</TABLE>
At the Annual Meeting of Stockholders, the stockholders also approved the
following:
(1) the appointment of Ernst & Young as independent auditors, by a vote of
5,312,028 shares in favor, 8,199 shares against and 4,410 shares
abstained.
At the Annual Meeting of Stockholders, the stockholders did not approve the
following:
(1) an Amendment to Steel of West Virginia, Inc.'s Certificate of
Incorporation to authorize 13,000,000 additional shares of common stock,
by a vote of 2,021,121 shares in favor, 3,010,333 shares against and 3,114
shares abstained;
(2) an Amendment to Steel of West Virginia, Inc.'s Certificate of
Incorporation to authorize 2,000,000 shares of preferred stock, by a vote
of 1,509,690 shares in favor, 3,414,708 shares against and 4,119 shares
abstained;
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(3) an Amendment to Steel of West Virginia, Inc.'s Certificate of
Incorporation to provide that stockholder action may be taken only at a
meeting of the stockholders, by a vote of 1,844,828 shares in favor,
3,080,535 shares against and 3,154 shares abstained; and
(4) a non-binding resolution requesting that the Board negotiate with potential
bidders concerning the sale of the Company, by a vote of 388,257 shares in
favor, 4,974,071 shares against and 709 shares abstained.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
4.1(h) Amendment, dated April 3, 1997 ("Amendment No. 8"), to the
Financing Agreement, dated December 30, 1986, between SWVA, Inc.
("SWVA") and The CIT Group/Business Credit, Inc. ("CIT")
4.10(d) Fourth Amendment to Deed of Trust, Assignment of Leases and Rents
and Security Agreement, dated April 3, 1997 ("Mortgage Amendment
No. 4"), by SWVA in favor of CIT
4.12 Promissory Note, dated April 3, 1997 ("Note 5"), in the principal
amount of $23,000,000 issued by SWVA in favor of The CIT
Group/Business Credit, Inc.
10.1(h) Amendment No. 8 (see Exhibit 4.1(h))
10.10(c) Mortgage Amendment No. 4 (see Exhibit 4.10(d))
10.26 Note 5 (see Exhibit 4.12)
11.1 Computation of Earnings Per Share
Data
(b) Reports on Form 8-K
None
12
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
DATED: August 14, 1997 STEEL OF WEST VIRGINIA, INC.
-----------------------------------
(Registrant)
/s/ Timothy R. Duke
-----------------------------------
Timothy R. Duke, President and
Chief Executive Officer
/s/ Mark G. Meikle
-----------------------------------
Mark G. Meikle, Vice President,
Treasurer and Chief Financial
Officer
13
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Exhibit 4.1(h)
1997 Amendment Agreement
, 1997
--------------
SWVA, Inc.
17th Street and 2nd Avenue
Huntington, WV 25726
Gentlemen:
We refer to the Financing Agreement between us dated December 30, 1986, as
amended (the "Financing Agreement"). Capitalized terms used herein and
defined in the Financing Agreement shall have the meanings set forth in said
Financing Agreement unless otherwise specifically defined herein.
You have requested that we extend to you an additional credit facility with
respect to financing your new capital expenditures program and that various
provisions of the Financing Agreement be amended. We have agreed to the
foregoing subject to, and in accordance with, the terms, provisions and
conditions hereof.
Effective immediately pursuant to mutual understanding, the Financing
Agreement shall be, and hereby is, amended as follows:
1) The definitions of "Anniversary Date", "Term Loans", "Promissory Notes",
"Early Termination Fee", and "Prepayment Discount Rate" in Section 1 of the
Financing Agreement shall be, and each hereby is, deleted and the following
shall be, and hereby is substituted in lieu thereof:
"ANNIVERSARY DATE shall mean January 1, 2001."
"TERM LOANS shall mean the CAPEX Term Loans and the Additional CAPEX Term
Loans made and to be made by CITBC to the Company pursuant to, and
repayable in accordance with, the provisions of Section 3 of the Financing
Agreement."
"PROMISSORY NOTES shall mean the notes in the forms of Exhibits B and
C attached hereto, delivered by the Company to CITBC to evidence the Term
Loans pursuant to, and repayable in accordance with the provisions of
Section 3 of this Financing Agreement."
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"EARLY TERMINATION FEE shall: i) mean the fee CITBC is entitled to
charge the Company in the event the Company terminates the Line of
Credit or this Financing Agreement on a date prior to January 1, 1999;
and ii) be determined by multiplying the average daily loan balance
under the Revolving Loan for the period from the date of this
Financing Agreement to the Early Termination Date by one and one-half
percent (1 1/2%) for the number of days from the Early Termination
Date to January 1, 1999."
PREPAYMENT DISCOUNT RATE shall mean the sum of (i) the yield equal to
the quarterly bid yield to maturity of a U.S. Treasury Note or Bond
issued within three (3) months prior to the date prepayment of any
Treasury Rate Loan (as shown under the column heading "Ask Yld." for
"Govt. Bonds & Notes" in the Treasury Bonds, Notes & Bills" section of
The Wall Street Journal - Eastern Edition published on the second
(2nd) business day prior to the date of prepayment) with a remaining
term equal to the Weighted Average Life to Maturity, plus (ii) three
percent (3%) for any part of the Term Loans that bears interest at the
Treasury Rate.
2) The definition of "Going Public Fee" shall be, and hereby is, deleted from
Section 1 of the Financing Agreement and the following definitions shall be, and
each hereby is, added to Section 1 of the Financing Agreement in the proper
alphabetical order:
"ADDITIONAL CAPEX TERM LOANS shall mean the term loans made and to be
made to the Company by CITBC in the aggregate principal amount of up
to $23,000,000, as more fully described in Section 3 of this Financing
Agreement."
"ADDITIONAL CAPEX TERM LOAN LINE OF CREDIT shall mean the commitment
of CITBC to make Additional CAPEX Term Loans to the Company pursuant
to Section 3 of this Financing Agreement in the aggregate amount not
to exceed $23,000,000."
"CHASE BANK RATE shall mean the rate of interest per annum announced
by The Chase Manhattan Bank, or its successor in interest, from time
to time as its prime rate in effect at its principal office in the
County, City and State of New York. (The prime rate is not intended
to be the lowest rate of interest charged by The Chase Manhattan Bank
to its borrowers)."
3) Section 3, Paragraphs 6 and 7 of the Financing Agreement shall be, and each
hereby is amended in its entirety to read as follows:
"6. The Company may, at its option, prepay all or any part of the
principal of the Term Loans, before maturity, provided that on each
prepayment the Company shall pay accrued interest on the principal so
prepaid to the date of such prepayment."
"7. Each Mandatory Prepayment or voluntary prepayment shall be applied
to the last maturing installments of principal of the CAPEX Term Loans
until paid in full and then to the last maturing installments of the
Additional CAPEX Term Loans until paid in full."
2
<PAGE>
4) Section 3, Paragraph 3 of the Financing Agreement shall be, and hereby is,
amended by the addition thereto of the following new paragraphs d and e:
"3.(d) Within the available and unused Additional CAPEX Term Loan Line
of Credit and upon receipt of a Promissory Note, in the form of
Exhibit C attached hereto, from the Company in the amount of the
Additional CAPEX Term Loan, CITBC will extend to the Company an
Additional CAPEX Term Loan, provided: a) the Company is not then in
breach or violation of this Financing Agreement, and b) all of the
conditions listed below are fulfilled to the sole but reasonable
satisfaction of CITBC. The conditions are as follows:
i) Additional CAPEX Term Loan proceeds are to be used exclusively to
pay for, or reimburse the Company for, the acquisition by the
Company of newly acquired capital improvements (other than Real
Estate) which are not subject to Purchase Money Liens or any
other lien or security interest;
ii) the Company must give CITBC fifteen (15) days prior written
notice of its intention to enter into an Additional CAPEX Term
Loan and draw down the Additional CAPEX Term Loans no later than
July 1, 1998;
iii) the Company shall be entitled to four (4) Additional Capex Term
Loans per calendar year but no more than one (1) Additional CAPEX
Term Loan in any fiscal quarter;
iv) no Additional CAPEX Term Loan may exceed eighty percent (80%) of
the total acquisition costs of the capital improvements (other
than Real Estate) exclusive of assembly costs, installation
expenses, maintenance, shipping costs, taxes and import or custom
charges for which the Additional CAPEX Term Loan is sought; and
v) each Additional CAPEX Term Loan must be in increments of
$250,000.00 or whole multiples thereof and may not exceed in the
aggregate the Additional CAPEX Term Loan Line of Credit.
(e) Each Additional CAPEX Term Loan will be repaid to CITBC by the
Company in equal quarterly installments of principal computed on a ten
(10) year amortization schedule, which installments shall commence on
July 1, 1998 and thereafter on the first business day of each October,
January, April and July thereafter until paid in full. To the extent
repaid, Additional CAPEX Term Loans may not be reborrowed under this
Section 3 of the Financing Agreement."
5) Section 7, Paragraph 2 of the Financing Agreement shall be, and each
hereby is, amended in its entirety to read as follows:
"2.(a) Interest on the Term Loans shall be payable monthly as of the
end of each month on the unpaid balance or on payment in full prior to
maturity in an amount
3
<PAGE>
equal to the (i) Chase Bank Rate, on a per annum
basis on the outstanding balance of all Term Loans (other than Libor
Loans), and (ii) one and three-quarters percent (1 3/4%) plus Libor,
on a per annum basis, on any Term Loans which are Libor Loans on the
average of the net balances owing by the Company to CITBC in the
Company's account at the close of each day during the month. The
Company may elect to use Libor as to any then outstanding Term Loans
provided x) there is then no Event of Default, y) the Company has so
advised CITBC of its election to use Libor and the Libor Period
selected no later than three (3) business days preceding the first day
of a Libor Period and z) the election and Libor shall be effective,
provided there is then no Event of Default, on the fourth business day
following said notice. The Libor elections must be for $1,000,000 or
more and there shall be no more than 3 elections to use Libor to
compute interest at any one time under paragraphs 1 and 2 of this
Section 7. If no such election is timely made or can be made or if
Libor can not be determined, then CITBC shall use the Chase Bank Rate
to compute interest. In the event of any change in said Chase Bank
Rate, the rate under clause "(i)" above shall change, as of the first
of the month following any change, so as to remain equal to the Chase
Bank Rate. The rates hereunder shall be calculated based on a 360 day
year. CITBC shall be entitled to charge the Company's account at the
rate provided for herein when due until all Obligations have been paid
in full. (b)(i) In lieu of interest computed at the rates specified in
Paragraph "(a)" above, the Company shall have the option to elect a
fixed rate of interest on all or a portion of the Additional CAPEX
Term Loans during a one hundred and eighty (180) days period
commencing on July 1, 1998 (the "Election Period"), such interest rate
(x) shall be applied only to the then outstanding balance of the
Additional CAPEX Term Loans, and (y) shall be equal to the Treasury
Rate plus three percent (3%). Such fixed rate election may be
exercised only once during such Election Period. In addition, if the
first day for which interest is payable on the Additional CAPEX Term
Loans subject to a fixed interest rate is other than the first day of
a calendar month, the amount of such interest payable pursuant to
Paragraph 2 of this Section 7 with respect to such Additional CAPEX
Term Loans for the initial month for which such fixed interest rate is
calculated shall be prorated for the number of days of such month that
such Addition CAPEX Term Loans are outstanding.
(ii) Provided that (x) there is then no Event of Default and (y) the
Company has given a notice in accordance with this Paragraph 2(b)(ii),
the Company may convert all or a portion of the Additional CAPEX Term
Loans from a variable interest rate to a Treasury Rate - provided,
however, (A) that such fixed rate shall be applicable only to the then
outstanding Additional CAPEX Term Loans and (B) any such conversion
must be made within one hundred and eighty (180) days after July 1,
1998 and (C) the Treasury Rate shall be applicable for a period up to
but not exceeding 3 years. Whenever the Company desires to convert a
variable interest rate to a Treasury Rate, the Company must notify
CITBC of its election no later than thirty (30) calendar days
preceding the first day of the next succeeding month. If no such
election is timely made or can be made or upon expiration of the
applicable duration of any such Treasury Rate Loan, CITBC shall use
the Chase Bank Rate in lieu of the Treasury Rate. Each notice of
election hereunder shall (1) identify the Additional CAPEX Term Loans
to be converted and the aggregate outstanding principal balance
thereof, (2) specify
4
<PAGE>
the effective date of the conversion and the duration of such conversion,
and (3) specify the principal amount of such Additional CAPEX Term Loans
to be converted, and, in the case of any such notice given other than in
writing , shall be immediately followed by a written confirmation thereof
by the Company; provided, however, that if such written confirmation
differs in any material respect from the action taken by CITBC prior to
receiving such written confirmation and based upon a nonwritten notice,
the records of CITBC shall control absent manifest error.
(iii) Subject to the applicable provisions relating to prepayment of
the Term Loans, the Company may prepay the Treasury Rate Loans at any
time provided that upon such prepayment it pays to CITBC the
Make-Whole Premium in immediately available funds.
(iv) Interest on the Additional CAPEX Term Loans for which a fixed
rate election has been made shall be payable as of the end of each
month on the unpaid balance thereof or on payment in full prior to
maturity in an amount equal to such applicable fixed rate on any
Additional CAPEX Term Loans which are the Treasury Rate Loans computed
on the average of the net balances thereof owing by the Company to
CITBC in the Company's account at the close of each day during the
month. Such rate shall be calculated on a 360 day year. CITBC shall
be entitled to charge the Company's account at such rate when due
until all Obligations have been paid in full."
7) Section 10 of the Financing Agreement shall be, and hereto is, amended by
deleting the "proviso" at the end of the fourth sentence thereof.
8) It is further agreed that:
(a) The term "Obligations" as used in the Financing Agreement shall
also include, without limitation, all present and future
indebtedness, liabilities and obligations of the Company to CITBC
pursuant to the Additional CAPEX Term Loans.
(b) The form of Promissory Note attached hereto shall be annexed to
the Financing Agreement as Exhibit C and shall evidence the
Additional CAPEX Term Loans.
(c) The Additional CAPEX Term Loans shall (i) incur interest at the
rate specified in Section 7, Paragraph 2 of the Financing
Agreement and (ii) be secured by all Collateral.
(d) All references to "Chemical Bank Rate" in the Financing Agreement
shall be, and hereby are, amended to read "Chase Bank Rate".
(e) The Company acknowledges and agrees that CITBC may make
assignments and/or sell participation in the loans and extensions
of credit made and to be made to the Company under the Financing
Agreement (as amended hereby) on such terms and conditions as
CITBC shall in its sole discretion determine. The Company
further acknowledges that in doing so, CITBC may grant to such
co-lenders or participants certain rights which would require
CITBC to obtain the co-lender's or participant's consent prior to
executing certain waivers
5
<PAGE>
and/or amendments, and prior to taking certain other actions with
respect to the provisions of the Financing Agreement, provided that
such co-lenders and participants shall not be granted independent
rights to conduct audits and/or examinations of the Company's books
and records and/or Collateral but shall have the right to accompany
CITBC on any such audits or examinations at the participant's cost and
expense.
(f) The extension of Additional CAPEX Term Loans shall be conditioned
upon the fulfillment of the following conditions precedent to
CITBC's reasonable satisfaction:
(i) The Company simultaneously executing and delivering to CITBC
the Promissory Note referred to in Paragraph 8(b) above and
Mortgages and/or Deeds of Trust granting to CITBC first mortgage
liens upon the Company's Real Estate to secure the Additional
CAPEX Term Loans.
(ii) Our receipt of certified resolutions authorizing the
execution, delivery and performance of the transactions
contemplated by this amendment.
(iii) Parent signing below to confirm that the term "Obligations"
as defined and used in the Guaranty and Pledge Agreement executed
by Parent in favor of CITBC shall also include, without
limitation, all indebtedness, liabilities and obligations of the
Company to CITBC arising in connection with the Additional CAPEX
Term Loans.
(iv) Marshall Steel, Inc. ("Marshall") signing below to confirm
that the term "Obligations" as defined and used in the Guaranty,
Security Agreement and Negative Pledge Agreement executed by
Marshall in favor of CITBC shall also include, without
limitation, all present and future indebtedness, liabilities and
obligations of the Company to CITBC arising in connection with
the Additional CAPEX Term Loans.
(v) CITBC's receipt of title insurance and a current survey (in
form and substance satisfactory to CITBC) with respect to the
Real Estate to be subject to the Mortgages and/or Deeds of Trust
referred to in paragraph 8(f)(i).
(vi) The absence of any Event of Default under the Financing
Agreement.
(g) By signing below you confirm your agreement to (i) pay to us an
Accommodation and Documentation Fee equal to $28,750 in the
aggregate upon execution of this amendment, and (ii) reimburse us
for all of our Out-of-Pocket Expenses incurred in connection with
this amendment and the transactions contemplated hereby. All such
amounts may, at our option, be charged to your loan amount under
the Financing Agreement when due.
Except as set forth herein no other change in the terms or provisions of the
Financing Agreement is intended or implied. If the foregoing is in
accordance with your understanding, kindly so indicate by signing and
returning the enclosed copy of this letter.
6
<PAGE>
Parent and Marshall have signed below to confirm their respective agreements to
subparagraphs (iii) and (iv) of paragraph 8(f) above.
THE CIT GROUP/BUSINESS
CREDIT, INC.
By:
---------------------------
Title:
Read and Agreed to:
SWVA, INC.
By:
----------------------
Title:
Confirmed:
STEEL OF WEST VIRGINIA, INC.
By:
-----------------------
Title:
MARSHALL STEEL, INC.
By:
-----------------------
Title:
7
<PAGE>
Exhibit 4.10(d)
CROSS REFERENCE TO:
Trust Deed Book 1195, Page 112
Trust Deed Book 1250, Page 628
Trust Deed Book 1329, Page 45
Trust Deed Book ____, Page __
Land Records of Cabell County,
West Virginia
- --------------------------------------------------------------------------------
A CREDIT LINE DEED OF TRUST
This instrument is "A CREDIT LINE DEED OF TRUST" as provided in West
Virginia Code Chapter 38, Article 1, Section 14.
- --------------------------------------------------------------------------------
FOURTH AMENDMENT TO DEED OF TRUST,
ASSIGNMENT OF LEASES AND RENTS
AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS AND
SECURITY AGREEMENT (this "Fourth Amendment") effective as of __________ __, 1997
and executed as of ________ __, 1997, is made by and among SWVA, INC., a
Delaware corporation (successor by corporate merger to Steel of West Virginia,
Inc.), having a mailing address at 17th Street and 2nd Avenue, Huntington, West
Virginia 25726, Attention: President, party of the first part as grantor
("Grantor"), Douglas C. McElwee, an individual resident of the State of West
Virginia, whose mailing address is 600 United Center, 500 Virginia Street East,
Charleston, West Virginia 25301, party of the second part as trustee ("Trustee")
and THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, having a
mailing address of 900 Ashwood Parkway, Atlanta, Georgia 30338, Attention:
Michael F. Lapresi, Vice President, party of the third part as beneficiary
("Lender");
WITNESSETH:
WHEREAS, pursuant to that certain Financing Agreement (the "Original
Financing Agreement") dated December 30, 1986, by and between Grantor and
Lender, Lender extended to Grantor a certain credit facility and term debt (the
"Loan"), which Loan was evidenced by a certain Promissory Note ("Promissory
Note") dated of even date therewith, made by Grantor in favor of Lender, in the
original principal amount of $20,000,000.00 and secured by that certain Deed of
Trust, Assignment of Leases and Rents and Security Agreement (the "Original Deed
of Trust"), dated as of even date therewith, made and entered into by and among
Grantor, James O. Porter, as the original trustee thereunder, and Lender and
recorded in Trust Deed Book 1195, beginning at page 112, Land Records of Cabell
County, West Virginia, conveying to Trustee in trust for the benefit of Lender
certain improved real property located in the
<PAGE>
City of Huntington, Cabell County, West Virginia, as more particularly described
in the Original Deed of Trust; and
WHEREAS, on September 27, 1989, Grantor and Lender amended the Original
Financing Agreement to modify certain terms and conditions of the Loan,
including, inter alia, increasing the amount of term debt and, in connection
therewith, Grantor executed that certain Term Note ("Term Note II"), dated of
even date, in favor of Lender in the principal amount of $26,922,000.00, and
Grantor, Trustee and Lender entered into that certain First Amendment to Deed of
Trust, Assignment of Leases and Rents and Security Agreement dated of even date
therewith and recorded in Trust Deed Book 1250, beginning at page 628, aforesaid
Land Records, (the "First Amendment") to reflect the modifications to the Loan;
and
WHEREAS, on September 30, 1992, Grantor and Lender further amended the
Original Financing Agreement to modify certain terms and conditions of the Loan
including, inter alia, the extension to Grantor of an additional term loan in
the principal amount of $6,500,000.00 ("Term Loan III"), Term Loan III being
evidenced by that certain term note in the original principal amount of
$6,500,000.00 ("Term Note III"), and Grantor, Trustee and Lender entered into
that certain Second Amendment to Deed of Trust, Assignment of Leases and Rents
and Security Agreement dated of even date therewith and recorded in Trust Deed
Book 1329, beginning at page 45, aforesaid Land Records, (the "Second
Amendment") to reflect the further modifications to the Loan; and
WHEREAS, on February 1, 1994, Grantor and Lender further amended the
Original Financing Agreement to modify certain terms and conditions of the Loan
including, inter alia, the extension to Grantor of a certain CAPEX Term Loan
Line of Credit (as defined in the Financing Agreement) in an aggregate principal
amount of up to $16,000,000, pursuant to which Lender shall extend certain Capex
Term Loans (as defined in the Financing Agreement) to Grantor, which Capex Term
Loans shall be evidenced by certain Promissory Notes as more particularly
described in the Financing Agreement, Grantor, Trustee and Lender entered into
that certain Third Amendment to Deed of Trust, Assignment of Leases and Rents
and Security Agreement dated of even date therewith and recorded in Trust Deed
Book ___, beginning at page ___, aforesaid Land Records (the "Third Amendment")
to reflect the further modifications to the Loan; and
WHEREAS, effective as of March ___, 1997, Grantor and Lender have further
amended the Original Financing Agreement (the Original Financing Agreement, as
so amended, being hereinafter referred to as the "Financing Agreement") to
modify certain terms and conditions of the Loan including, inter alia, the
extension to Grantor under the Financing Agreement of a certain Additional CAPEX
Term Loan Line of Credit (as defined in the Financing Agreement) in the
aggregate principal amount not to exceed $23,000,000, pursuant to which Lender
shall extend certain Additional CAPEX Term Loans (as defined in the Financing
Agreement) to Grantor, which
2
<PAGE>
Additional CAPEX Term Loans shall be evidenced by certain Promissory Notes as
more particularly described in the Financing Agreement;
WHEREAS, all amounts due and owing under the Promissory Note, the Term II
Note and the Term III Note have been paid in full; and
WHEREAS, Grantor, Trustee and Lender desire to further modify the terms
and conditions of the Original Deed of Trust, as amended by the First Amendment,
the Second Amendment and the Third Amendment, to reflect the above-referenced
modification to the Loan.
NOW, THEREFORE, in consideration of the foregoing premises and the sum of
TEN AND NO/100THS DOLLARS ($10.00) in hand paid by Lender to Grantor and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
A. Terms.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings ascribed thereto in the Deed of Trust.
B. Modification of the Deed of Trust. The Original Deed of Trust, as
amended by the First Amendment, the Second Amendment and the Third Amendment, is
hereby further amended as follows:
1. Paragraph (a) on page 4 of the Original Deed of Trust as amended by the
First Amendment, the Second Amendment and the Third Amendment, is hereby deleted
in its entirety and the following new paragraph (a) is inserted in lieu thereof:
"(a) The debt evidenced by (i) the Promissory Note (the "Capex
Promissory Notes") to be executed and delivered in connection with the
CAPEX Term Loan to be extended pursuant to Section 3 of the Financing
Agreement (as hereinafter defined) in an aggregate principal amount of up
to $16,000,000 and (ii) the Promissory Note (the "Additional CAPEX
Promissory Note") to be executed and delivered in connection with the
Additional CAPEX Term Loan to be extended pursuant to Section 3 of the
Financing Agreement in an aggregate principal amount not to exceed
$23,000,000 (the CAPEX Promissory Note and the Additional CAPEX Promissory
Note are hereinafter collectively referred to as the "Notes" and
singularly referred to as a "Note"), together with any and all renewals,
modifications, amendments and extensions and/or consolidations of the
indebtedness evidenced by the Notes."
2. The defined term "Note" is hereby deleted wherever it appears and the
defined term "Notes" is inserted in lieu thereof.
3
<PAGE>
3. The Original Deed of Trust, as amended by the First Amendment, the
Second Amendment, the Third Amendment and as further amended by this Fourth
Amendment, is hereafter referred to as the "Deed of Trust."
4. The Deed of Trust, the Notes and any other document heretofore, now or
hereafter executed to evidence, secure or otherwise pertain to the Loan are
hereafter collectively referred to as the "Loan Documents."
C. Warranties.
By its execution hereof, Grantor warrants and represents to Lender that,
as of the date hereof, there does not exist a Default, Event of Default or event
or circumstance which with the passage of time or giving of notice or both would
constitute a Default or Event of Default, as the case may be, under the Notes,
the Deed of Trust or any of the other Loan Documents; by its execution hereof,
Grantor also reaffirms, as of the date hereof, all of the representations and
warranties of Grantor contained in the Notes, the Deed of Trust and all of the
other Loan Documents.
D. Ratification.
Grantor hereby acknowledges and agrees that, except as set forth herein or
expressly modified or amended hereby, the Loan Documents have not previously
been modified or amended and are in full force and effect. Grantor hereby
ratifies and confirms all of the terms, covenants and conditions set forth in
the Notes, Deed of Trust and the other Loan Documents and hereby acknowledges
that the Notes, Deed of Trust and the other Loan Documents constitute valid and
binding obligations of Grantor. Without limiting the foregoing, Grantor hereby
ratifies and confirms the grant and conveyance of the "Premises" (as defined in
the Deed of Trust) to Trustee for the benefit of Lender as security for
repayment of the "Indebtedness", as defined in the Deed of Trust. Grantor
further represents and warrants to Lender that the Deed of Trust is and
continues to be a first priority Deed of Trust encumbering the Premises as
security for the Loan, subject only to the Permitted Encumbrances stated
therein. Grantor further acknowledges and agrees that the Notes, the Deed of
Trust and the other Loan Documents are enforceable in accordance with their
terms and free from claims of defense, setoff or recoupment against Lender or
any other person or party.
E. Execution in Counterparts.
This Fourth Amendment may be executed in any number of counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but one
and the same agreement.
4
<PAGE>
F. Successors and Assigns.
The covenants and agreements herein contained shall bind, and the rights
hereunder shall inure to, the respective successors and assigns of Lender and
Grantor. The captions and headings of the paragraphs of this Fourth Amendment
are for convenience only and are not to be used to interpret or define the
provisions hereof.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
under seal as of the day and year first above written.
GRANTOR:
Signed, sealed and delivered SWVA, INC.,
in the presence of: a Delaware corporation
______________________________ By: _______________________________
Witness Name:
Title:
______________________________ Attest: ___________________________
Witness Name:
Title:
[CORPORATE SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
6
<PAGE>
TRUSTEE:
Signed, sealed and delivered
in the presence of:
_____________________________ ___________________________(SEAL)
Witness Douglas C. McElwee
_____________________________
Witness
[SIGNATURES CONTINUED ON NEXT PAGE]
7
<PAGE>
LENDER:
Signed, sealed and delivered THE CIT GROUP/BUSINESS CREDIT,
in the presence of: INC., a New York corporation
______________________________ By: _______________________________
Witness Name:
Title:
______________________________ Attest: ___________________________
Witness Name:
Title:
[CORPORATE SEAL]
8
<PAGE>
ACKNOWLEDGMENT
STATE OF __________
COUNTY OF _________
I, ___________________, a notary public of said State and County, do
certify that ______________ and ________________, who signed the writing above
bearing date the day of _____, 1997, as _______________ and ________________,
respectively, of SWVA, Inc., have this day in my said County, before me,
acknowledged the said writing to be the act and deed of said corporation.
Given under my hand and official seal this _______ day of _______, 1997.
______________________________
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
9
<PAGE>
ACKNOWLEDGMENT
STATE OF WEST VIRGINIA
COUNTY OF KANAWHA
I, ____________________, a notary public of said State and County, do
certify that [Douglas C. McElwee], whose name is signed to the writing above as
Trustee, bearing date the _______ day of ________, 1997, has this day
acknowledged the same before me in my said County.
Given under my hand and official seal this _______ day of __________,
1997.
______________________________
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
10
<PAGE>
ACKNOWLEDGMENT
STATE OF _________
COUNTY OF ________
I, __________________, a notary public of said State and County, do
certify that ______________ and ______________, who signed the writing above
bearing date the day of ________, 1997, as ______________ and ______________,
respectively, of The CIT Group/Business Credit, Inc., have this day in my said
County, before me, acknowledged the said writing to be the act and deed of said
corporation.
Given under my hand and official seal this ________ day of _________,
1997.
_________________________________
Notary Public
My Commission Expires:
[NOTARIAL SEAL]
11
<PAGE>
Exhibit 4.12
EXHIBIT C
PROMISSORY NOTE
--------------------- , 199-
$23,000,000
FOR VALUE RECEIVED, the undersigned SWVA, Inc., a Delaware corporation (the
"Company"), promises to pay to the order of THE CIT GROUP/BUSINESS CREDIT,
INC. (herein "CITBC") at its office located 900 Ashwood Parkway, Atlanta, GA
30338, in lawful money of the United States of America and in immediately
available funds, the principal amount equal to the lesser of (i) Twenty-Three
Million Dollars ($23,000,000) or (ii) the aggregate outstanding principal
balance of Additional CAPEX Term Loans made to the Company during the period
from the date hereof to and including July 1, 1998 as reflected on CIT/BC's
books and records which, subject to the provisions of Section 2, Paragraph 7
of the Financing Agreement, shall be conclusive proof of the amount
outstanding hereunder in forty (40) equal quarterly principal installments
each in the amount of $575,000 until principal balance of this Note is paid
in full, whereof the first such installment shall be due and payable on July
1, 1998 and subsequent installments shall be due and payable on the first
business day of each October, January, April and July thereafter until this
note is paid in full.
The Company further agrees to pay interest at said office, in like money, on
the unpaid principal amount owing hereunder from time to time from the date
of disbursement thereof and at the rate specified in Section 7, paragraph 2
of the Financing Agreement.
If any payment on this Note becomes due and payable on a day other than a
business day, the maturity thereof shall be extended to the next succeeding
business day, and with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such extension.
This Note is one of the Promissory Notes referred to in the Financing
Agreement dated December 30, 1986, between the Company and CITBC, as amended
(the "Financing Agreement"), evidences the Additional CAPEX Term Loans
thereunder, and is subject to, and entitled to, all provisions and benefits
thereof and is subject to optional and mandatory prepayment, in whole or in
part, as provided therein.
<PAGE>
Upon the occurrence of any one of the Events of Default specified in
the Financing Agreement or upon termination of the Financing Agreement, all
amounts then remaining unpaid on this Note may become, or be declared to be,
at the sole election of CITBC, immediately due and payable as provided in the
Financing Agreement.
SWVA, INC.
By:-----------------
Title:
<PAGE>
EXHIBIT 11.1
Computation of Earnings Per Share Data
The following formulas were used to calculate the earnings per share data
shown in the Consolidated Statements of Income and Retained Earnings for the
three months and six months ended June 30, 1997 and June 30, 1996 included in
this Report.
CALCULATION
THREE MONTHS ENDED
June 30, 1997 Net Income Net Income = $1,657,000 = $ .28
---------------------- -----------
per common Weighted average shares 5,994,114
share of Common Stock for the
period
June 30, 1996 Net Income Net Income = $ 618,000 = $ .10
----------------------- -----------
per common Weighted average shares 5,986,923
share of Common Stock for the
period
SIX MONTHS ENDED
June 30, 1997 Net Income Net Income = $ 3,202,000 = $ .53
----------------------- -----------
per common Weighted average shares 5,992,987
share of Common Stock for the
period
June 30, 1996 Net Income Net Income = $ 631,000 = $ .10
----------------------- -----------
per common Weighted average shares 6,060,658
share of Common Stock for the
period
For purposes of calculating earnings per share, there were 5,994,114 and
5,992,987 weighted average shares of common stock outstanding during the
three months and six months ended June 30, 1997 and 5,986,923 and 6,060,658
weighted average shares of common stock outstanding during the three months
and six months ended June 30, 1996. The effect of the Company's stock option
plans was anti-dilutive for all periods presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 11,513
<ALLOWANCES> 579
<INVENTORY> 21,494
<CURRENT-ASSETS> 36,549
<PP&E> 69,236
<DEPRECIATION> (29,285)
<TOTAL-ASSETS> 94,940
<CURRENT-LIABILITIES> 16,007
<BONDS> 20,665
0
0
<COMMON> 71
<OTHER-SE> 52,138
<TOTAL-LIABILITY-AND-EQUITY> 94,940
<SALES> 52,351
<TOTAL-REVENUES> 52,351
<CGS> 44,042
<TOTAL-COSTS> 44,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 495
<INCOME-PRETAX> 5,555
<INCOME-TAX> 2,353
<INCOME-CONTINUING> 3,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,202
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
